ACCA Applied Knowledge · Financial Accounting · Tangible non-current assets
Brio Co revalues its buildings. On 1 January Year 1 a building had a cost of $500,000 and accumulated depreciation of $100,000, with a remaining useful life of 20 years. It was revalued to $480,000 on that date. What is the balance on the revaluation surplus after the revaluation?
The revaluation surplus is $80,000. The carrying amount before revaluation is cost $500,000 less depreciation $100,000, which is $400,000, and the building is revalued to $480,000, so the gain over carrying amount is $80,000.
- A$80,000Correct
- B$100,000
- C$(20,000)
- D$0
Explanation
Carrying amount is 500,000 - 100,000 = 400,000. Revalued amount is 480,000, so the gain is 80,000, credited to the revaluation surplus. The figure of 100,000 wrongly ignores or misuses accumulated depreciation by treating it as the gain.
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